[Federal Register: March 27, 2008 (Volume 73, Number 60)]
[Rules and Regulations]
[Page 16179-16198]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr08-2]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 240 and 249
[Release No. 34-57526; File No. S7-06-07]
RIN 3235-AJ80
Proposed Rule Changes of Self-Regulatory Organizations
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
adopting rule amendments to require Self-Regulatory Organizations
(``SROs'') that submit proposed rule changes pursuant to Section
19(b)(7)(A) of the Securities Exchange Act of 1934 (``Act'') to file
these rule changes electronically. In addition, the Commission is
adopting rule amendments to require SROs to post all such proposed rule
changes on their Web sites. Together, the amendments are designed to
expand the electronic filing by SROs of proposed rule changes, making
it more efficient and cost effective, and to harmonize the process of
filings made under Section 19(b)(7)(A) with that for filings made by
SROs under Section 19(b)(1) of the Act.
DATES: Effective Date: April 28, 2008.
FOR FURTHER INFORMATION CONTACT: John Roeser, Assistant Director, at
(202) 551-5630, Michou Nguyen, Special Counsel, at (202) 551-5634, or
Sherry Moore, Paralegal, at (202) 551-5549, Division of Trading and
Markets, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-6628.
SUPPLEMENTARY INFORMATION:
I. Introduction
On February 23, 2007, the Commission proposed to require SROs that
submit proposed rule changes pursuant to Section 19(b)(7)(A) of the
[[Page 16180]]
Act \1\ to file these rule changes electronically.\2\ The Commission
proposed amending Rule 19b-7 and Form 19b-7 to: (1) Require SROs to
file proposed rule changes submitted pursuant to Section 19(b)(7)(A) of
the Act electronically, rather than in paper format; and (2) require
SROs to post all such proposed rule changes on their Web sites. The
Commission also proposed making certain conforming changes to Rule 19b-
4 and Form 19b-4.
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\1\ 15 U.S.C. 78s(b)(7)(A).
\2\ Securities Exchange Act Release No. 55341 (February 23,
2007), 72 FR 9412 (March 1, 2007) (``Electronic 19b-7 Proposing
Release'').
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Under Section 19(b)(7) of the Act and Rule 19b-7 thereunder,
securities futures exchanges registered with the Commission under
Section 6(g) of the Act and associations registered with the Commission
under Section 15A(k) of the Act \3\ for the limited purpose of
regulating activities of members who are registered as broker-dealers
in security futures products \4\ are required to file certain
categories of proposed rule changes with the Commission.\5\ These
proposed rule changes are published for comment and may take effect:
(1) When a written certification has been filed with the Commodity
Futures Trading Commission (``CFTC'') under Section 5c(c) of the
Commodity Exchange Act; (2) when the CFTC determines that review of the
proposed rule change is not necessary; or (3) when the CFTC approves
the proposed rule change.\6\ Rule 19b-7 and Form 19b-7 under the Act
set forth the process for SROs to file proposed rule changes under
Section 19(b)(7) of the Act.
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\3\ 15 U.S.C. 78o-1(k).
\4\ See Section 15(b)(11) of the Act. 15 U.S.C. 78o(b)(11).
\5\ Section 19(b)(7) of the Act. 15 U.S.C. 78s(b)(7).
Specifically, under Section 19(b)(7), these SROs submit those
proposed rule changes that relate to higher margin levels, fraud or
manipulation, recordkeeping, reporting, listing standards, or
decimal pricing for security futures products, sales practices for
security futures products for persons who effect transactions in
security futures products, or rules effectuating the SRO's
obligation to enforce the securities laws.
\6\ Section 19(b)(7)(B) of the Act. 15 U.S.C. 78s(b)(7)(B).
Proposed rule changes that relate to margin, except for those that
result in higher margin levels, must be filed pursuant to Sections
19(b)(1) of the Act. 15 U.S.C. 78s(b)(1).
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Currently, SROs are required to electronically file proposed rule
changes submitted to the Commission under Section 19(b)(1) of the
Act.\7\ SROs are also required to post such proposed rule changes on
their Web sites.\8\
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\7\ 17 CFR 240.19b-4. See Securities Exchange Act Release No.
50486 (October 4, 2004), 69 FR 60287 (October 8, 2004) (File No. S7-
18-04) (``Electronic 19b-4 Adopting Release'').
\8\ 17 CFR 240.19b-4(l).
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Proposed rule changes submitted by SROs under Section 19(b)(7) of
the Act, in contrast, are submitted to the Commission in paper.\9\ In
addition, SROs are not currently required to post proposed rule changes
filed under Section 19(b)(7) on their Web sites. The Commission
proposed to amend Rule 19b-7 and Form 19b-7 to require electronic
filing and Web posting of proposed rule changes filed under Section
19(b)(7) of the Act. These proposals were designed to conform to the
requirements already in place for proposed rule changes filed pursuant
to Rule 19b-4 and Form 19b-4.
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\9\ See Securities Exchange Act Release No. 44692 (August 13,
2001), 66 FR 43721 (August 20, 2001) (Paper Form 19b-7 Adopting
Release).
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The Commission received two comment letters in response to its
request for comments.\10\ The commenters were generally supportive of
the proposed amendments but offered a few suggestions for refinements
to the proposal. In addition, commenters commended the Commission's
efforts to improve the rule filing process and make it less costly and
more efficient. One commenter also offered suggestions relating to
matters outside the scope of this rulemaking.\11\ The Commission has
determined to adopt the amendments substantially as proposed, with
modifications to address the comments of the NFA and with some
clarifications.
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\10\ See letters to Nancy M. Morris, Secretary, Commission,
from: Thomas W. Sexton, Vice President and General Counsel, National
Futures Association (``NFA''), dated April 23, 2007 (``NFA Letter'')
and James J. Angel, PhD, CFA, Associate Professor of Finance,
McDonough School of Business, Georgetown University, dated April 30,
2007 (``Angel Letter'').
\11\ See Angel Letter, supra note 10 at 1-2.
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II. Amendments
A. Electronic Filing
The Commission proposed to amend Rule 19b-7 and Form 19b-7 to
require that Form 19b-7, and any amendments thereto, be submitted
electronically to the Commission. The Commission is adopting these
amendments as proposed.
Based on the Commission's experience receiving electronic Rule 19b-
4 filings from SROs, the Commission believes that requiring SROs to
file proposed rule changes on Form 19b-7 electronically will have many
benefits. First, the Commission believes electronic filing will reduce
the amount of time required by SROs to submit SRO rule filings by
eliminating paper delivery, photocopying, and distribution. Under the
current system, SROs send paper copies of proposed rule changes on Form
19b-7 to the Commission via messenger, overnight delivery, or U.S.
mail. Electronic filing will reduce costs for the SROs \12\ because the
SROs will no longer incur costs for delivery of paper filings or for
the SRO staff time currently devoted to preparing filing packages. The
Commission also will benefit from reducing the personnel time currently
associated with manually processing paper filings.
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\12\ See infra notes 65-69 and accompanying text.
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Second, electronic filing will allow for a more efficient use of
Commission resources by integrating the SRO electronic filing
technology with SRO Rule Tracking System (``SRTS''), the internal
Commission database that tracks these filings, enabling Commission
staff to more easily monitor and process proposed rule changes.
Pertinent information regarding proposed rule changes, as well as
amendments, will be captured automatically by SRTS. As a result,
Commission staff will be able to monitor electronically the progress of
proposed rule changes filed on Form 19b-7 from initial receipt through
final disposition and thereby enhance its management of the rule filing
process.
As of 5:30 p.m. Eastern Daylight Saving Time on April 25, 2008, the
Commission will no longer accept SRO proposed rule changes in paper
format. Beginning at 9 a.m. Eastern Daylight Saving Time on April 28,
2008, SROs will be required to file all Forms 19b-7 and any amendments
to Forms 19b-7 electronically, according to the procedures and in the
format described in Rule 19b-7 and Form 19b-7, as amended. SROs will
gain access to a secure Web site known as the EFFS, which enables
authorized individuals at the SRO to file proposed rule changes with
the Commission electronically.\13\ Proposed rule changes will be deemed
filed on the business day the Commission receives the proposed rule
change electronically, provided the Commission receives the filing
before 5:30 p.m. Eastern Standard Time or Eastern Daylight Saving Time,
whichever is in effect at the time of filing, and it is filed in
accordance with Rule 19b-7 and Form 19b-7, as amended. The Commission
has eliminated the requirement that SROs submit multiple, paper copies
of proposed rule changes.\14\
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\13\ The SRO will determine which individuals would be supplied
with User IDs and passwords to access the secure Web site. See infra
note 17 and accompanying text.
\14\ Occasionally, an SRO may find it necessary to file
documents that cannot be submitted electronically, such as comment
letters submitted to the Exchange before filing, or other exhibits.
In addition, it may not be appropriate to require proprietary and
other information subject to a request for confidential treatment to
be filed electronically. Accordingly, the amendments to Rule 19b-7
and Form 19b-7 will retain the flexibility to permit portions of a
rule filing to be made in paper form under limited circumstances.
For example, the Commission will permit SROs to file materials for
which confidential treatment is requested in paper format.
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[[Page 16181]]
As had been proposed, the adopted amendment to Form 19b-7 requires
SROs to file their proposed rule changes with an electronic
signature.\15\ Form 19b-7 requires that a filing be signed on the SRO's
behalf by a person ``duly authorized'' to sign a proposed rule
change.\16\ Each duly authorized signatory will be required to obtain a
``digital ID,'' which provides both the Commission and the SRO with
assurances of the authenticity and integrity of the electronically-
submitted Form 19b-7.\17\ In addition, each signatory will be required
to manually sign a hard copy of the Form 19b-7, authenticating,
acknowledging, or otherwise adopting his or her electronic signature
that is attached to or logically associated with the filing. In
accordance with Rule 17a-1 under the Act,\18\ the SRO is required to
retain that manual signature page of the rule filing, authenticating
the signatory's electronic signature, for not less than five years
after the Form 19b-7 is filed with the Commission and, upon request,
furnish a copy of it to the Commission or its staff.\19\
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\15\ The Commission notes that the Electronic Signatures in
Global and National Commerce Act, 15 U.S.C. 7001, et seq. does not
apply in this regard.
\16\ The Commission is clarifying on amended Form 19b-7 that
this individual must be an officer of the SRO, who has been
authorized by the SRO's governing body to sign proposed rule changes
on behalf of the SRO. See Instruction E to Form 19b-7.
\17\ A digital ID, sometimes called a ``digital certificate,''
is a file on the computer that identifies the user. Computers can
use a digital ID to create a digital signature that verifies both
that the message originated from a specific person and that the
message has not been altered either intentionally or accidentally.
The user obtains a digital ID from a ``Certificate Authority''
(``CA'') for a modest sum (currently approximately $20 per year).
When the SRO electronically sends the Form 19b-7 to the Commission,
the digital ID will encrypt the data through a system that uses
``key pairs.'' With key pairs, the SRO's software application uses
one key to encrypt the document. When the Commission receives the
SRO's electronic document, the Commission's software will use a
matching key to decrypt the document.
\18\ 17 CFR 240.17a-1.
\19\ See Rule 19b-7(d). These requirements are substantially
consistent with the requirements for Form 19b-4 filings, which were
adapted from Section 232.302 of Regulation S-T, 17 CFR 232.302 for
EDGAR filers.
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One commenter suggested that the Commission use its exemptive
authority to eliminate the requirement that SROs file proposed rule
changes with the Commission pursuant to Section 19(b)(7) of the
Act.\20\ The Commission believes that this comment is outside the scope
of the proposed amendments and therefore is not making any changes to
the proposal in this regard.
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\20\ See Angel Letter, supra note 10 at 1.
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B. Posting of Rule 19b-7 Proposed Rule Changes on SRO Web Sites
The Commission also proposed to amend Rule 19b-7 to require each
SRO to post proposed rule changes filed pursuant to that Rule, and any
amendments thereto, on its public Web site no later than two business
days after filing with the Commission. The Commission also proposed to
require SROs to continue to post such proposed rule changes until 60
days after the SRO files a written certification with the CFTC, the
CFTC determines that review of the proposed rule change is not
necessary, or the CFTC approves the proposed rule change. The
Commission is adopting these amendments as proposed.
The Commission believes the Web site posting requirement provides
interested persons with easy access to proposed rule changes, while at
the same time providing SROs with sufficient time to comply with the
posting requirement.\21\ Based on the Commission's experience with
respect to SROs' obligation to post proposed rule changes under Rule
19b-4, the Commission believes that the two business day timeframe
strikes an appropriate balance between promoting the public interest of
having proposed rule changes posted quickly and the need for the SROs
to have adequate time to perform the technological tasks necessary to
post the proposed rule change.\22\ The Commission believes all market
participants, investors, and other interested parties should have
access to SRO proposed rule changes filed with the Commission, and any
amendments, as soon as practicable. Moreover, the Commission believes
that Web site accessibility of SRO proposed rule changes filed under
Section 19(b)(7) of the Act will: (1) Provide interested persons with
faster access to proposed rule changes; (2) facilitate the ability of
interested persons to comment on the proposals; (3) save SRO resources
currently used to monitor the Commission's Public Reference Room for
competitors' proposed rule changes; and (4) enhance the transparency of
the rule filing process by providing ready access to proposed rule
changes and facilitating public comment on them.
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\21\ The complete proposed rule change will also be available
electronically in the Commission's Public Reference Room.
\22\ An SRO controls the timing of filing proposed rule changes
and amendments and can assure that its technology staff is prepared
to post the proposed rule change on the SRO's public Web site within
two business days of filing with the Commission.
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The Commission is also adopting as proposed amendments requiring
SROs to remove proposed rule changes filed under Section 19(b)(7) of
the Act that are deemed not properly filed and returned to SROs or
withdrawn by SROs from their Web sites within two business days from
the Commission's notification to the SRO that such proposed rule change
was not properly filed,\23\ or of the SRO's withdrawal of the proposed
rule change.
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\23\ A screen within EFFS will indicate that a rule filing has
not been properly filed and has been returned to the SRO.
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The NFA requested clarification on whether it could keep proposed
rule changes on its Web site for longer than the 60-day period provided
in the proposed rule, and whether it could maintain on its Web site the
letter submitted to the CFTC in connection with a proposed rule change
that it withdraws from filing with the Commission or is notified was
not properly filed. NFA also noted that leaving the letter submitted to
the CFTC on the NFA Web site may provide useful historical information
regarding NFA rule changes or other matters.\24\ In this regard, the
Commission notes that the amended rule only establishes minimum periods
for which an SRO must post its proposed rule changes. An SRO may
maintain a Form 19b-7 filing on its Web site after the 60-day period
has ended. In addition, Rule 19b-7 does not apply to any filing other
than those made under Section 19(b)(7)(A). Thus, an SRO may post on its
Web site submissions to the CFTC or other materials, as it chooses.
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\24\ See NFA Letter, supra note 10 at 2.
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Finally, Dr. Angel, suggested that all SROs be required to describe
the status of rule filings (e.g., ``effective,'' ``under review at the
Commission,'' ``rejected,'' ``superseded by a new proposal,'' etc.) on
their Web sites.\25\ In addition, Dr. Angel suggested that the
Commission require SROs to post all filings submitted to the
Commission, including Form 1 and Form PILOT, and that the Commission
require alternative trading systems to post their Forms ATS on their
respective Web sites.\26\ The Commission believes these suggestions are
outside the scope of the proposed amendments, which relate exclusively
to electronic filing by securities futures exchanges under Section
19(b)(7) of the
[[Page 16182]]
Act, and therefore is not modifying the proposal in response to these
comments.\27\
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\25\ See Angel Letter, supra note 10 at 1.
\26\ See Angel Letter, supra note 10 at 2.
\27\ The Commission notes that it proposed to require SROs to
post amendments to their Form 1s on their Web sites. See Securities
Release Act No. 50699 (November 18, 2004), 69 FR 71126 (December 8,
2004). The Commission has not taken action on this proposal.
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C. Requirement To Update Rule Text on SRO Web Sites
Currently, Rule 19b-4(m) under the Act \28\ requires all SROs to
post and maintain on their Web sites a complete and accurate copy of
their rules. In addition, an SRO must update its Web site to reflect
rule changes within two business days after being notified of the
Commission's approval of a proposed rule change filed pursuant to
Section 19(b)(2) of the Act or of the Commission's notice of a proposed
rule change filed pursuant to 19(b)(3)(A) or 19(b)(7) of the Act. As
adopted, all SROs will continue to be required to post and maintain a
complete and accurate copy of their rules and to update their Web sites
to reflect their proposed rule changes.
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\28\ 17 CFR 240.19b-4(m).
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1. New Paragraph (g) of Rule 19b-7
The Commission proposed to add paragraph (g) to Rule 19b-7 to move
the requirement that an SRO filing a proposed rule change under Section
19(b)(7): (1) Post and maintain a current and complete version of its
rules on its Web site; and (2) update the rules posted on its Web site
within two days after a rule change becomes effective.\29\ The
Commission is adopting new paragraph (g) to Rule 19b-7 as proposed,
with certain minor changes to reflect comments from the NFA.\30\
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\29\ Section 19(b)(7)(B) of the Act requires a proposed rule
change filed with the Commission under Section 19(b)(7) of the Act
to be filed concurrently with the CFTC. Such proposed rule change is
effective upon filing of a written certification with the CFTC, upon
a determination by the CFTC that review of the proposed rule change
is not necessary, or upon approval of the proposed rule change by
the CFTC. 15 U.S.C. 78s(b)(7)(B).
\30\ Dr. Angel suggested that the Commission require SROs to
post their rulebooks on their Web site in one Adobe pdf file for
ease of searching. See Angel Letter, supra note 10 at 1. While the
Commission encourages the SROs to employ technology on their Web
sites which facilitates research of their rules, the Commission does
not believe it is necessary or appropriate to require SROs to use a
particular application to publish their rules.
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The NFA asked the Commission to modify the proposed language in
Rule 19b-7(g) so that an SRO's obligation to update its rules on its
Web site would apply no sooner than two days after the SRO's receipt of
notice from the CFTC that it had determined that review of the proposal
was not necessary or that it had approved the proposal.\31\ The NFA
states that the CFTC does not have an electronic filing system and,
therefore, the NFA does not always receive immediate notification of
CFTC action.
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\31\ See NFA Letter, supra note 10 at 2-3.
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In response to the NFA's comment, the Commission is amending Rule
19b-7(g) to require an SRO to update its Web site to reflect rule
changes filed under Section 19(b)(7) within two business days of the
later of: (1) The Commission's notice of the proposed rule change; or
(2) the filing by the SRO of a certification with the CFTC under
Section 5c(c) of the Commodities Exchange Act, receipt of notice from
the CFTC that it has determined that review of such proposed rule
change is not necessary, or receipt of notice from the CFTC that it has
approved such proposed rule change. The Commission believes these
changes are appropriate because they do not impose an obligation on an
SRO to update its Web site until the SRO has notice of the CFTC action
and no sooner than SROs are obligated to update their rule text for
proposals submitted pursuant to Section 19(b)(3)(A) of the Act, which
are effective upon filing with the Commission.
2. Amendments to Paragraph (m) of Rule 19b-4
The Commission also proposed to make a conforming change to Rule
19b-4 to remove the requirement in paragraph (m) that SROs update their
Web sites to reflect proposed rule changes filed pursuant to Section
19(b)(7) of the Act. As discussed above, the Commission has moved this
requirement to Rule 19b-7. The Commission is adopting the conforming
changes to Rule 19b-4 as proposed.\32\
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\32\ See Rule 19b-4(m)(2). The final rule also clarifies that
the two-day time period is business days.
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In addition, in response to comments from the NFA, the Commission
is modifying Rule 19b-4(m) as it applies to an exchange registered with
the Commission under Section 6(g) or a limited purpose national
securities association registered under Section 15A(k) with regard to
the period within which it must update its rule text on its Web site.
An Exchange registered with the Commission under Section 6(g) of the
Act \33\ or a limited purpose national securities association
registered under Section 15A(k) of the Act,\34\ may be required to file
certain proposed rule changes under Section 19(b)(2) of the Act. Such
proposed rule changes do not become effective until: (1) The Commission
approved the proposal; and (2) the SRO filed with the CFTC a written
certification, the CFTC determined that review of the proposed rule
change is not necessary, or the CFTC approved the proposed rule change.
Accordingly, the final rule the Commission is adopting provides that an
exchange that is registered with the Commission under Section 6(g) of
the Act or a limited purpose national securities association registered
under Section 15A(k) of the Act, is required to update its rule text on
its Web site to reflect rule changes filed under Section 19(b)(2) of
the Act within two business days of the later of: (1) The Commission's
approval of the proposed rule change; or (2) the SRO's filing of a
written certification with the CFTC under Section 5c(c) of the
Commodity Exchange Act, notice from the CFTC that it has determined
that review of the proposed rule change is not necessary, or notice
from the CFTC that it has approved the proposed rule change.\35\
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\33\ 15 U.S.C. 78f(g).
\34\ 15 U.S.C. 78o-1(k).
\35\ See Rule 19b-4(m)(3).
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The Commission believes these modifications to the proposal are
appropriate because they reflect the practical effect of the fact that
exchanges registered under Section 6(g) of the Act and national
securities association registered under Section 15A(k) of the Act are
also regulated by the CFTC. Under this dual regulatory scheme, proposed
rule changes must become effective under both the Act and the CEA. The
final rule makes clear that such an SRO's obligation to update its Web
site to reflect rule changes arises only after such rule changes have
become effective under both the Act and the CEA.
D. Form 19b-7 Amendments
1. Form 19b-7 Amendments
The Commission proposed to amend the instructions to Form 19b-7 to
eliminate the requirement to submit nine paper copies and instead to
require electronic filing of Form 19b-7. The Commission is adopting
this amendment as proposed. To access the secure Internet site for Web-
based filing of the Form 19b-7, an SRO will submit to the Commission an
External Application User Authentication Form (``EAUF'') to register
each individual at the SRO who will be submitting Forms 19b-7 on behalf
of the SRO. Upon receipt and verification of the information in the
EAUF process, the Commission will issue each such person a User ID and
Password to permit access to the Commission's secure Web site. As
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Form 19b-7 will be electronic, initially the authorized user at an SRO
will access a screen containing a filing template, referenced as Page
1, in which it can identify the SRO, enter a brief description of the
proposed rule change, and enter a brief description of the SRO
governing body action approval.\36\ The SRO will provide contact
information and place the electronic signature of a duly authorized
officer on this Page 1 initial screen.\37\ The second screen of the
electronic Form 19b-7 will provide the SRO with a means to attach the
proposed rule change and related exhibits in Microsoft Word format.\38\
EAUF users will have electronic access to a mechanism to fulfill the
requirements of the Form, as adapted for electronic filing.\39\
Finally, the SRO will use the electronic Form 19b-7 to amend or
withdraw a rule filing pending with the Commission.
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\36\ The authorized user also will be able to indicate if there
will be a separate filing of any hard copy exhibits that are unable
to be submitted electronically.
\37\ As noted supra notes 15-17, and accompanying text, a person
that is a ``duly authorized officer'' at the SRO will be required to
place his or her ``electronic signature'' on the Form 19b-7 before
it is transmitted electronically to the Commission.
\38\ An SRO may also submit Exhibits 2, 3, and 5 in another
acceptable electronic format, including Microsoft Excel, Microsoft
PowerPoint, Adobe Acrobat, or Corel WordPerfect, if Microsoft Word
is not available to the SRO or the document is not compatible with
Microsoft Word.
\39\ For example, the SRO will click separate boxes on the
second screen to attach documents containing the various exhibits;
notices, written comments, transcripts, other communications; form,
report, or questionnaire; proposed rule text; CFTC certification;
the completed notice of the proposed rule change for publication in
the Federal Register; and, marked copies of amendments if
applicable.
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The Commission also proposed a number of changes to Form 19b-7,
unrelated to electronic filing, that are modeled after certain
provisions in Form 19b-4, which the Commission believed would
facilitate an SRO's proper filing of Form 19b-7. The Commission is
adopting the changes to Form 19b-7 substantially as proposed. For
example, the format of the Instructions to Form 19b-7 will be organized
according to the sections currently used for Form 19b-4 Instructions,
instead of the combination of questions and titles that serve as
subject heads in the existing Instructions to Form 19b-7 currently. The
amended Form 19b-7 will require the SRO to describe the purpose of the
proposed rule change in sufficient detail to enable the public to
provide meaningful public comment.\40\ The Form 19b-7 will direct the
SRO to relevant sections of the Act that are appropriate for discussion
in the Statutory Basis section of the Form 19b-7 and will clarify that
a mere assertion that the proposed rule change is consistent with the
Act is not sufficient to describe why the proposed rule change is
consistent with the Act. The amended Form 19b-7 will also provide
updated instructions related to the solicitation of comments from
interested persons regarding the proposed rule change. These updated
instructions will include the new address where interested parties may
direct comments to Form 19b-7 filings in hard copy and describe the
manner in which comments may be submitted on the Commission Web site.
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\40\ See also General Instructions for Form 19b-4, which
establish a similar requirement for Form 19b-4.
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The changes to Form 19b-7 will alter the way that the Exhibits are
organized and the Instructions to such Exhibits are presented. For
example, the amended Instructions will direct an SRO to include the
completed notice of the proposed rule change (``Form 19b-7 Notice'' or
``Notice'') as Exhibit 1, whereas such notice is not assigned to an
Exhibit in the existing Form 19b-7. The instructions for the Form 19b-7
Notice will be amended to include more detailed guidance on the current
requirement that the Notice must be formatted to comply with the
requirements for Federal Register publication. For example, the amended
Instructions will provide guidance regarding Federal Register
requirements relating to margin spacing, page numbering, and line
spacing.
The subject of existing Exhibit 1, relating to communications with
third parties on the subject of the proposed rule change, will move to
Exhibit 2. The guidance in the existing Instructions to Exhibit 2 will
be replaced, in Exhibit 3, with more detailed guidance as to how the
SRO should present forms, reports, and questionnaires that the SRO
proposes to use to implement the terms of the proposed rule change. The
requirement to include the text of the proposed rule change will remain
in Exhibit 4, but the requirement for the SRO to describe the
anticipated effect of the proposed rule change would have on the
application of other rules of the SRO will move to Section II(A)(1)(b)
of the Form 19b-7 Notice.
The Commission is adopting as proposed, a requirement that an SRO
submitting a Form 19b-7 attach, in Exhibit 5, a document reflecting the
certificate of effectiveness of a proposed rule change, an SRO's
request or the CFTC's determination that review of the proposed rule
change is not necessary, or an SRO's request for CFTC approval or an
indication from the CFTC that the proposed rule change has been
approved. Page 1 of Form 19b-7 will provide a space for SROs to
indicate which of these actions, noted in the preceding sentence, has
been taken by the SRO or the CFTC. After further consideration of the
issue, the Commission is modifying Page 1 to provide greater
specificity as to the status of the effectiveness of the proposed rule
change. Accordingly, Page 1 will have separate boxes for the SRO to
mark indicating whether it is attaching a copy of its request that the
CFTC determine that review of the proposed rule change is not necessary
or a copy of the CFTC's determination that review of the proposed rule
change is not necessary. Similarly, an SRO will be able to mark
separate boxes indicating whether the SRO is attaching a document
reflecting the SRO's request that the CFTC approve the proposed rule
change or to indicate that the SRO is attaching the CFTC's approval of
the proposed rule change. Page 1 will also indicate that the SRO may
submit more than one document in Exhibit 5.
As amended, the Instructions to Form 19b-7 describe circumstances
under which an SRO must file an amendment to a proposed rule change and
the procedures an SRO must follow when submitting an amendment
electronically. The Instructions for Form 19b-7 state, in relevant
part, that if ``any information on this form or exhibit thereto is or
becomes inaccurate before the proposed rule change becomes effective,
the [SRO] shall file amendments correcting any such inaccuracy.'' This
instruction, for example, will require an SRO to file an amended
Exhibit 5 when the SRO receives notice from the CFTC that review of the
proposed rule change is not necessary or that the CFTC has approved the
proposed rule change, if the SRO receives such notice following the
submission of the original proposed rule change.
The Commission believes that the changes to Form 19b-7, which are
designed generally to conform to the updated Form 19b-4, will promote
uniformity among SRO proposed rule change filings. This uniformity
should facilitate SROs' compliance with the rule filing requirements
under section 19(b) and the Commission's review of proposed rule
changes. The changes are also expected to facilitate a speedy migration
to electronic filing for SROs submitting proposed rule changes under
section 19(b)(7).
As noted above, the Commission recognizes that in rare
circumstances SROs may be unable to file certain documents
electronically with the
[[Page 16184]]
Commission. Therefore, under these limited circumstances, the
Commission would consider whether to allow SROs to file documents in
paper format within five days of the electronic filing of all other
required documents.\41\ In the Electronic 19b-7 Proposing Release, the
Commission solicited comment on whether there would be a need for an
exception to the electronic filing requirement of Exhibit 5 to Form
19b-7. In response, the NFA suggested that while an explicit exception
from the electronic filing requirement of Exhibit 5 was not necessary,
the Commission should reserve the general exemptive authority to allow
paper filings for all or part of a rule filing in unusual
situations.\42\ The Commission believes that the proposed rule changes
filed pursuant to Section 19(b)(7) of the Act are usually not so time-
sensitive that failure to file them with the Commission on a particular
date will result in negative consequences to SROs, their members, or
investors. In the rare situation where an SRO can demonstrate to the
Commission that its inability to file a proposed rule change
electronically on that particular date will cause harm to the SRO, its
members, or investors, the Commission would consider appropriate
relief. In such emergency situations, the Commission could consider an
SRO's exemption request from the electronic rule filing requirements of
Section 19(b) of the Act pursuant to Rule 0-12 of the Act \43\ and
Section 36(a)(1) of the Act \44\ ``to the extent that such exemption is
necessary or appropriate in the public interest, and is consistent with
the protection of investors.'' In making such findings, the Commission
generally would consider important the existence of factors such as:
(1) An extended electronic outage at the SRO facility or at the
Commission; (2) a pressing need for implementation of the proposed rule
change; and (3) a failure of back-up facilities. The Commission notes
that SROs, in their business continuity planning, should ensure that
they have appropriate back-up facilities to accommodate electronic
filing of proposed rule changes. Accordingly, the Commission is
adopting the rule as originally proposed, without a specific exception
to permit SROs to file Exhibit 5 on paper.
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\41\ This exception from electronic filing would not apply to
Page 1 to Form 19b-7 or Exhibits 1 and 4 thereto but would only be
applicable to Exhibits 2 and 3, and any documents filed pursuant to
a request for confidential treatment pursuant to the Freedom of
Information Act, 5 U.S.C. 552.
\42\ See NFA Letter at 2.
\43\ 17 CFR 240.0-12.
\44\ 15 U.S.C. 78mm(a)(1).
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2. Accurate, Consistent, and Complete Forms 19b-7
The Commission firmly believes that, to provide the public with a
meaningful opportunity to comment, a proposed rule change must be
accurate, consistent, and complete. Form 19b-7 states that the form,
including the exhibits, is intended to elicit information necessary for
the public to provide meaningful comment on the proposed rule change
and for the Commission to determine whether abrogation of the proposal
is appropriate because it unduly burdens competition or efficiency,
conflicts with the securities laws, or is inconsistent with the public
interest and protection of investors.\45\ The SRO must provide all the
information called for by the form, including the exhibits, and must
present the information in a clear and comprehensible manner.
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\45\ Section 19(b)(7)(C) of the Act grants to the Commission,
after consultation with the CFTC, the authority to summarily
abrogate a proposed rule change that has taken effect pursuant to
Section 19(b)(7)(B) of the Act if it appears to the Commission that
such a rule change unduly burdens competition or efficiency,
conflicts with the securities laws, or is inconsistent with the
public interest and the protection of investors.
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Currently, Commission staff devotes significant time to processing
proposed rule changes, reviewing them for accuracy and completeness,
and preparing them for publication. SRO staff must ensure that the
filings: (1) Contain a properly completed Form 19b-7; (2) contain a
clear and accurate statement of the authority for, and basis and
purpose of, such rule change, including the impact on competition; (3)
contain a summary of any written comments received by the SRO; (4)
contain the proper certification submitted to the CFTC, any other
appropriate determination made by the CFTC that a review of the
proposed rule change is not necessary, or an indication that the CFTC
has approved the proposed rule change; and (5) describe the impact of
the proposed rule change on the existing rules of the SRO, including
any other rules proposed to be amended. As described in the current
Form 19b-7, filings that do not comply with the foregoing are deemed
not filed and returned to the SRO. Under these amendments the
Commission is adopting, electronically filed proposed rule changes that
do not comply with the foregoing will continue to be returned to the
SRO, but in electronic format, and, consistent with current practice,
will be deemed not filed with the Commission until all required
information has been provided.
E. Amendments to Form 19b-4
The Commission proposed to clarify on Form 19b-4 that an individual
who signs the Form 19b-4 digitally must be an officer authorized by the
SRO's governing body to sign proposed rule changes on behalf of the
SRO. Accordingly, the Commission proposed to amend Page 1 of Form 19b-4
to add the word ``officer'' to follow the phrase ``duly authorized'' in
the Signature Box appearing on that page.\46\ The Commission notes that
this change does not create any new obligation. Section F of the
Instructions to Form 19b-4 provides that a ``duly authorized officer''
sign Form 19b-4 submissions, but the word ``officer'' was inadvertently
omitted from the signature box when the electronic Form 19b-4 was
adopted.\47\ The Commission is adopting this amendment as proposed.
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\46\ The proposed amendment to Form 19b-4 is attached as
Appendix B.
\47\ See Electronic 19b-4 Adopting Release, supra note 7.
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F. Date of Effectiveness of the Proposal
One commenter requested a 30 day delay before implementation of the
proposed amendments.\48\ The Commission believes that the SROs will
benefit from an effective date that provides them with time to
familiarize themselves with the EFFS and to make the technological
changes to the procedures for updating their Web sites necessary to
comply with the new obligations under this proposal. Accordingly, these
amendments will become effective on April 28, 2008, 30 days following
publication in the Federal Register.
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\48\ See NFA Letter at 3.
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III. Paperwork Reduction Act
Certain provisions of the amendments to Rule 19b-7 and Form 19b-7
and Rule 19b-4 and Form 19b-4 contain ``collection of information
requirements'' within the meaning of the Paperwork Reduction Act of
1995.\49\ Accordingly, the Commission submitted the information to the
Office of Management and Budget (``OMB'') for review revisions to the
current collection of information titled ``Rule 19b-7 Under the
Securities Exchange Act of 1934'' (OMB Control No. 3235-0553). The
Commission also submitted revisions to the current collection of
information titled ``Form 19b-7 Under the Securities Exchange Act of
1934'' (OMB Control No. 3235-0553). In addition, the Commission has
submitted
[[Page 16185]]
revisions to the current collection of information titled ``Rule 19b-4
Under the Securities Exchange Act of 1934'' (OMB Control No. 3235-
0045). Finally, the Commission submitted revisions to the current
collection of information titled ``Form 19b-4 Under the Securities
Exchange Act of 1934'' (OMB Control No. 3235-0045). An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number. In the Electronic 19b-7 Proposing Release, the Commission
solicited comments on the collection of information requirements, but
received no response to the solicitation. Accordingly, the Commission
is making no adjustments to the burden estimates provided in the
Electronic 19b-7 Proposing Release.\50\
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\49\ 44 U.S.C. 3501 et seq.
\50\ See supra note 2, 72 FR 9412, 9418.
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A. Summary of Collection of Information
Prior to these amendments, Rule 19b-7 required an SRO that proposes
to add, delete, or amend its rules relating to certain subjects \51\ to
submit such proposed rule change to the Commission on Form 19b-7. Form
19b-7 required the respondent: (1) To state the purpose of the proposed
rule change; (2) to state the authority and statutory basis for the
proposed rule change; (3) to describe the proposal's impact on
competition; (4) to provide a summary of any written comments on the
proposed rule change received by the SRO; and (5) to describe the date
upon which the proposed rule change becomes effective and provide
supporting documentation relevant to the effectiveness date. The
amendments add a requirement to Form 19b-7 that an SRO provide on Page
1 of Form 19b-7 more information about a staff member prepared to
answer questions about the filing, such as the SRO staff member's
title, e-mail address and fax number. The amendments also require Web
site posting of all proposed rule changes, and any amendments thereto.
In addition, the amendments codify in Rule 19b-7 the requirement
previously located in Rule 19b-4(m) that SROs submitting Form 19b-7
post a current and complete set of their rules on their Web sites. In
response to a commenter's concerns, the Commission modified the
amendment so that a security futures exchange or a limited purpose
national securities association will be required to update its Web site
within two business days after it files a written certification with
the CFTC under Section 5c(c) of the Commodities Exchange Act, within
two business days after the SRO's receipt of notice from the CFTC that
it has determined that review of the proposed rule change is not
necessary, or within two business days after the SRO receives an
indication from the CFTC that it has approved the proposed rule change,
or within two business days of the Commission's notice of the proposed
rule change, if such notice occurs after the CFTC certification,
determination, or approval. The amendments also clarify that a mere
assertion that the proposed rule change is consistent with the Act is
not sufficient to describe why the proposed rule change is consistent
with the Act. Rule 19b-4(m) will continue to require SROs to update
their rules on their Web sites to reflect proposed rule changes filed
pursuant to Section 19(b)(2) and 19(b)(3)(A) of the Act. Proposed Rule
19b-7(g) will require SROs to update their rule texts on their Web
sites to reflect rule changes filed pursuant to Section 19(b)(7) of the
Act following the Commission's notice of such proposed rule change,
within two business days after such rule change takes effect. All SROs
that file Form 19b-4 and Form 19b-7 currently post this information on
their Web sites. Therefore, SROs will not be required to provide
additional information to comply with proposed Rule 19b-7(g) and
current Rule 19b-4(m).
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\51\ See 15 U.S.C. 78f(g)(4)(B)(i) and 78o-3(k)(3)(A).
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B. Use of Information
The information provided via EAUF, as required by the amendments to
Form 19b-7, will be used by the Commission to verify the identity of
the individual representing the SRO and provide such individual access
to a secure Commission Web site for filing of the Form 19b-7. The
amendment will require that SROs post their proposed rule changes filed
pursuant to Section 19(b)(7) of the Act on their Web sites, so that
these proposals could be viewed by the general public, SRO members,
competing SROs, other market participants, and Commission staff. The
information will enable interested parties to more easily access SRO
rules and rule filings, which will facilitate public comment on
proposed SRO rules. In addition, SRO staff, members, industry
participants, and Commission staff will utilize the accurate and
current version of SRO rules that are posted on the SRO Web site to
facilitate compliance with such rules.
C. Respondents
There are currently five SROs \52\ registered with the Commission
as national securities exchanges under Section 6(g) of the Act or as a
national securities association registered with the Commission under
Section 15A(k) of the Act subject to the collection of information for
Rule 19b-7, though that number may vary owing to the consolidation of
SROs or the introduction of new entities. In a fiscal year, these
respondents filed an average of 12 rule change proposals and 3
amendments to those proposed rule change proposals, for an average of
15 filings per fiscal year that are subject to the current collection
of information.\53\ Of the 12 proposed rule changes filed by SROs, all
12 ultimately became effective because the SROs did not withdraw any
proposed rule changes.
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\52\ The Board of Trade of the City of Chicago, Inc. (``CBOT''),
Chicago Mercantile Exchange, Inc. (``CME''), CBOE Futures Exchange
LLC (``CFE''), NFA, and OneChicago LLC (``OC'').
\53\ Since the implementation of the CFMA in 2001 to September
30, 2006, SROs have filed 62 proposed rule changes pursuant to
Section 19(b)(7) of the Act and 13 amendments.
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D. Total Annual Reporting and Recordkeeping Burden
1. Background
The amendments to Rule 19b-7 and Form 19b-7 are designed to
modernize the SRO rule filing process and to make the process more
efficient by conserving both SRO and Commission resources. Rule 19b-7
and Form 19b-7 are amended to require SROs to electronically file their
proposed rule changes. Form 19b-7 is revised to accommodate electronic
submission. In addition, SROs will be required to post on their Web
sites proposed rule changes submitted on Form 19b-7 to the Commission
and amendments thereto. A conforming amendment codifies in Rule 19b-7
the current requirement in Rule 19b-4(m) for SROs to maintain a current
and complete set of their rules on their Web site.
2. Rule 19b-7 and Form 19b-7
The Commission does not expect that the amendments to Rule 19b-7
and Form 19b-7 relating to electronic filing of proposed rule changes
and amendments will impose any material upfront cost on SROs. The
technology for electronic filing will be Web-based; therefore, the SROs
are not expected to have any material upfront technology expenditures
for electronic filing because all SROs currently have access to the
Internet.
[[Page 16186]]
However, each SRO will be required to obtain a digital ID from a
certificating authority. The Commission estimates the annual cost of
the ID to be approximately $20 for each SRO.\54\ The Commission
estimates that each SRO will purchase five such digital IDs for its
staff. Thus, the annual cost of the ID for all SROs is expected to be
approximately $500 (5 SROs x $20 x 5). The Commission included these
estimates in its proposal and received no comments on them.
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\54\ This estimate is based upon the $19.95 price displayed for
the ID on VeriSign's Web site as of October 2, 2007.
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In addition, the Commission believes that SROs may incur some costs
associated with training their personnel about the procedures for
submitting proposed rule changes electronically via EFFS. However, the
Commission believes that such costs will be one-time costs and
relatively insubstantial since the SROs are already familiar with the
information required in filing a proposed rule change with the
Commission and will be required to submit the same information they
currently submit in electronic form under these amendments. Based on
the experience of the Commission staff in training SROs for the
implementation of electronic Form 19b-4 filings, the Commission
estimates that each SRO will spend approximately two hours training
each staff member who will use the EFFS to submit the proposed rule
changes electronically. Accordingly, the Commission estimates that the
upfront cost of training SRO staff members to use EFFS will be 50 hours
(5 SROs x 2 hours x 5 staff members). The Commission included these
estimates in its proposal and received no comments on them.
An SRO rule change proposal is generally filed with the Commission
after an SRO's staff has obtained approval from its Board. The time
required to complete a filing varies significantly and is difficult to
separate from the time an SRO spends in developing internally the
proposed rule change. However, the Commission estimates that 15.5 hours
is the amount of time required to complete an average rule filing using
present Form 19b-7.\55\ This figure includes an estimated 11.5 hours of
in-house legal work and four hours of clerical work. The amount of time
required to prepare amendments varies because some amendments are
comprehensive, while other amendments are submitted in the form of a
one-page letter. The Commission estimates that, under current rules,
seven hours is the amount of time required to prepare an amendment to
the rule proposal. This figure includes an estimated two hours of in-
house legal work and five hours of clerical work. The Commission
included these estimates in its proposal and received no comments on
them.
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\55\ See Electronic 19b-7 Proposing Release, supra note 2.
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Based upon the experience of electronic filing of proposed rule
changes on Form 19b-4, the Commission expects that an electronic Form
19b-7 and new requirements to Form 19b-7 will reduce by three hours the
amount of SRO clerical time required to prepare the average proposed
rule change and by four hours for an amendment thereto. The Commission
does not believe that the new instruction specifying that an SRO
describe the purpose of the proposed rule change in sufficient detail
to enable the Commission to determine whether abrogation is appropriate
will add any additional burden to the Form 19b-7 filing process because
the existing Instructions to Form 19b-7 already required that all
information in the Form must be presented in a manner which will enable
the Commission to make such a determination. The Commission does not
believe that the additional contact information of an SRO staff member
on Page 1 of the Form will add any measurable burden to an SRO
submitting a Form 19b-7, because the information is so readily
accessible to the party submitting the filing. The Commission does not
believe that requiring the SROs to indicate on Page 1 of Form 19b-7
whether the CFTC has determined that review of the proposed rule change
is not necessary or that the CFTC has approved the proposed rule
change, as proposed herein, will create any addition burden to the SROs
because the SROs are already required to indicate such information in
Exhibit 1 to Form 19b-7. With the proposed electronic filing, the
Commission staff estimates that 12.5 hours is the amount of time that
will be required to complete an average rule filing and that three
hours is the amount of time required to complete an average amendment.
These figures reflect the three hours in savings in clerical hours that
would result from the use of an electronic form for rule filings and
four hours for amendments.\56\ The Commission estimates that the
reporting burden for filing rule change proposals and amendments with
the Commission under the proposed amendments will be 159 hours (12 rule
change proposals x 12.5 hours + 3 amendments x 3 hours). The Commission
included these estimates in its proposal and received no comments on
them.
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\56\ The SROs' four hour time savings would result from the
elimination of tasks, such as making multiple copies of the Form
19b-7 and amendments, arranging for couriers, and making follow-up
telephone calls to ensure Commission receipt.
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3. Posting of Proposed Rule Changes Filed Under Rule 19b-7 on SRO Web
Sites
The amendments also require SROs to post proposed rule changes
filed under Rule 19b-7, and any amendments thereto, on their Web sites.
The Commission estimates that 30 minutes is the amount of time that
will be required to post a proposed rule on an SRO's Web site and that
30 minutes is the amount of time that will be required to post an
amendment on an SRO's Web site.\57\ The Commission estimates that the
reporting burden for posting rule change proposals and amendments on
the SRO Web sites will be approximately eight hours (12 rule change
proposals x 0.5 hours + 3 amendments x 0.5 hours). The Commission
included these estimates in its proposal and received no comments on
them.
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\57\ This estimate is based on information from the Commission's
Office of Information Technology.
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4. SRO Rule Text
Currently, all SROs are required to post their current rules on
their Web sites pursuant to Rule 19b-4(m). The Commission estimates,
based upon its analysis in the Electronic 19b-4 Adopting Release, that
the amount of the time required to update an SRO's rule text on its Web
site after a proposed rule change becomes effective to be four hours.
Proposed rule changes submitted under Section 19(b)(7)(A) become
effective an average of 12 times a year. Therefore, the Commission
estimates that the reporting burden for updating the posted SRO rules
on the SRO Web site will be 48 hours (12 proposed rule changes
submitted pursuant to Section 19(b)(7)(A) x 4 hours). The Commission
included these estimates in its proposal and received no comments on
them.
The amendment will move the burden associated with complying with
this provision from Rule 19b-4(m) to Rule 19b-7(g). Based upon the
Commission's reporting burden estimate described above, the Commission
estimates that the amendments will reduce the burden associated with
SROs' compliance with the requirement provided in Rule 19b-4 that SROs
post current and complete rule text on their Web sites and update that
rule text after it changes following the effectiveness of a proposed
rule
[[Page 16187]]
change by 48 hours annually and increase the corresponding burden for
compliance with Rule 19b-7 by 48 hours. The Commission anticipates that
the amendments to Rule 19b-7(g) proposed herein, relating to the timing
of updates to SRO rules do not impact the compliance burden for this
rule. The Commission included these estimates in its proposal and
received no comments on them.
In addition, in response to comments from the NFA, the Commission
is also modifying Rule 19b-4(m) as it applies to an exchange registered
with the Commission under Section 6(g) or a limited purpose national
securities association registered under Section 15A(k). In its comment
letter, the NFA noted that receipt of notification of CFTC action is
not always immediate and requested that the Commission change the
period within which an exchange registered with the Commission under
Section 6(g) or a limited purpose national securities association
registered under Section 15A(k) is required to update its Web site to
be based on receipt of CFTC action and not the date the CFTC action
occurs.\58\ In response to this comment, Rule 19b-7(g) will now require
that an exchange registered with the Commission under Section 6(g) or a
limited purpose national securities association registered under
Section 15A(k) to update its rule text on its Web site to reflect rule
changes filed under Section 19(b)(2) of the Act within two business day
of the later of: (1) Commission approval of the proposed rule change;
or (2) the SRO's filing of a written certification with the CFTC under
Section 5c(c) of the Commodities Exchange Act, notice from the CFTC
that it has determined that review of the proposed rule change is not
necessary, or notice from the CFTC that it has approved the proposed
rule change. The Commission does not believe this amendment will create
any additional burden to SROs because the SROs are already required to
update their Web sites following the Commission's approval of rule
changes submitted to the Commission pursuant to Section 19(b)(2) of the
Act.
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\58\ See NFA Letter, supra note 10 at 2-3.
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5. Total Annual Reporting Burden
The Commission estimates that the total annual reporting burden
under the proposed rule will be 167 hours (159 hours for filing
proposed rule changes and amendments + 8 hours for posting proposed
rule changes and amendments on the SROs' Web sites + 48 hours for
posting and updating complete sets of SRO rule text pursuant to Rule
19b-7--48 hours for posting and updating complete sets of SRO rule text
pursuant to Rule 19b-4).
In addition to the 167 hour annual burden, the Commission believes
that SROs may incur some costs associated with training their personnel
about the procedures for submitting proposed rule changes
electronically and submission of the information via EFFS. However, the
Commission believes that such costs will be one-time costs and
relatively insubstantial since the SROs are already familiar with the
information required in filing a proposed rule change with the
Commission and will be required to submit the information (already
required to be submitted) electronically under this proposal. The
Commission estimates that each SRO will spend approximately two hours
training each staff member who will use the EFFS to submit the proposed
rule changes electronically. Accordingly, the Commission estimates that
the upfront cost of training SRO staff members to use EFFS will be 50
hours (5 SROs x 2 hours x 5 staff members).
The Commission does not expect that the amendments with regard to
electronic filing will impose any material additional costs on SROs.
Instead, the Commission believes that the amendments to Rule 19b-7 and
Form 19b-7, on balance, will reduce paperwork costs related to the
submission of SRO proposed rule changes. The technology for electronic
filing will be Web-based; therefore, the SROs are not expected to have
any technology expenditures for electronic filing because all SROs
currently have access to the Internet.
As previously stated, the SROs may incur costs of eight hours
annually to post on their Web site their proposed rules, and amendments
thereto, no later than two business days after filing with by the
Commission. With regard to posting of and updating of accurate and
complete text of SRO final rules, the Commission believes that the
amendments will increase the burden associated with complying Rule 19b-
7 by 48 hours and reduce the burden associated with complying with Rule
19b-4 by 48 hours. In addition, the Commission does not anticipate that
SROs will incur any additional costs in complying with the change to
Form 19b-4, which adds the word ``officer'' to the Signature Box
because the addition of the word simply provides transparency to an
obligation that already exists.\59\ Accordingly, the Commission does
not believe that SROs will incur any additional costs in posting this
information on their Web sites.
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\59\ See Section F of the Instructions to Form 19b-4.
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E. Retention Period of Recordkeeping Requirements
The SROs will be required to retain records of the collection of
information (the manually signed signature page of the Form 19b-7) for
a period of not less than five years, the first two years in an easily
accessible place, according to the current recordkeeping requirements
set forth in Rule 17a-1 under the Act.\60\ The SROs will be required to
retain proposed rule changes, and any amendments, on their Web sites
until 60 days after effectiveness of the proposed rule that is filed
with both the Commission and the CFTC or within two business days of
withdrawal of the proposed rule change or notification that it is
improperly filed.\61\ The SRO will be required at all times to maintain
an accurate and up-to-date copy of all of its rules on its Web
site.\62\
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\60\ SROs may also destroy or otherwise dispose of such records
at the end of five years according to Rule 17a-5 under the Act. 17
CFR 240.17a-5.
\61\ See Rule 19b-7(f).
\62\ See Rule 19b-7(g).
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F. Collection of Information Is Mandatory
Any collection of information pursuant to the amendments to Rule
19b-7 and Form 19b-7 to require electronic filing with the Commission
of SRO proposed rule changes will be a mandatory collection of
information filed with the Commission as a means for the Commission to
review, and, as required, take action with respect to SRO proposed rule
changes. Any collection of information pursuant to amendments to
require Web site posting by the SROs of their proposed and final rules
will also be a mandatory collection of information.
G. Responses to Collection of Information Will Not Be Kept Confidential
Other than information for which an SRO requests and obtains
confidential treatment in accordance with the provisions of 5 U.S.C.
522, the collection of information pursuant to amendments to Rule 19b-7
and Form 19b-7 under the Act will not be confidential and will be
publicly available.\63\
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\63\ Consistent with applicable law, proposed SRO rule changes
containing proprietary or otherwise sensitive information may be
accorded confidential treatment, including requests submitted
pursuant to the protection afforded for such information in the
Freedom of Information Act, 5 U.S.C. 552.
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[[Page 16188]]
IV. Costs and Benefits of the Rulemaking
In the Electronic 19b-7 Proposing Release, the Commission
identified certain costs and benefits of the amendments to Rule 19b-7
and Form 19b-7.\64\ As noted, the Commission estimates that the total
annual paperwork reporting burden under the proposed rule will be 167
hours. The Commission, however, believes that there will be an overall
reduction of costs based on the amendments.\65\ The Commission received
one comment letter relating to the cost and benefits of the proposed
amendments.\66\ The commenter expressed its belief that the amendment
will reduce the costs and burdens associated with compliance with Rule
19b-7 and Form 19b-7. Thus, after careful consideration, the Commission
is not modifying its costs and benefits analysis from that presented in
the Electronic 19b-7 Proposing Release \67\ and believes that the
benefits of the amendments justify the costs that they will impose.
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\64\ See supra note 2, 72 FR 9412, 9418.
\65\ As noted in the Paperwork Reduction Act analysis, the
Commission staff based this total reporting burden of 159 hours for
filing proposed rule changes and amendments + 8 hours for posting
proposed rule changes and amendments on the SROs' Web sites + 48
hours for posting and updating complete sets of SRO rule text
pursuant to Rule 19b-7--48 hours for posting and updating complete
sets of SRO rule text pursuant to Rule 19b-4.
\66\ See NFA Letter, supra note 10.
\67\ See Proposing Release, supra note 2 at 27-30.
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A. Benefits
The amendments are designed to modernize the filing, receipt, and
processing of SRO proposed rule changes and to make the SRO rule filing
process more efficient by conserving both SRO and Commission resources.
The Commission believes that the changes to Rule 19b-7 and Form 19b-7
will permit SROs to file proposed rule changes with the Commission more
quickly and economically. For example, SROs are currently required to
pay for delivery costs of multiple paper copies to the Commission and
incur costs associated with monitoring the Commission's Public
Reference Room for competitors' rule filings. Requiring SROs to
electronically file proposed rule changes under Rule 19b-7 is expected
to reduce expenses associated with clerical time, postage, and copying
and to increase the speed, accuracy, and availability of information
beneficial to investors, other SROs, and financial markets.
The Commission does not expect that the amendments will impose
additional costs on SROs. Instead, the Commission believes that the
amendments to Rule 19b-7 and Form 19b-7, on balance, will reduce costs
related to the submission of SRO proposed rule changes. The technology
for electronic filing will be Web-based; therefore, the SRO is not
expected to have any material increase in technology expenditures for
electronic filing because all SROs currently have access to the
Internet. Accordingly, the Commission believes that the amendments to
Rule 19b-7 and Form 19b-7, by requiring the SROs to submit proposed
rule changes electronically, will reduce their costs.
Because Commission staff will no longer manually process the
receipt and distribution of SRO rule filings submitted on Form 19b-7,
electronic filing will also expedite the Commission's receipt of SRO
proposed rule changes filed under Rule 19b-7 and provide the SROs with
the certainty that the Commission has received the proposed rule
changes and has captured pertinent information about the rule changes
in SRTS. Based on the Commission's experience with electronic filing of
Form 19b-4, the Commission believes that integrating this electronic
filing technology with SRTS will also enhance the Commission's ability
to monitor and process SRO proposed rule changes filed on Form 19b-7.
Moreover, requiring SROs to post proposed rule changes filed under
Rule 19b-7 on their Web sites no later than two business days after
filing with the Commission is designed to increase availability of SRO
proposed rules and thereby facilitate the ability of interested parties
to comment on proposed rule changes. For instance, the posting of these
proposed rule changes will provide the public with access to the
filings on the SROs' Web sites and thereby reduce the burden on SRO and
Commission staff related to providing information about proposed rule
changes to interested parties. The Commission believes that the posting
of the proposed rule changes submitted on Form 19b-7 will also save SRO
resources that are currently being used to monitor the Commission's
Public Reference Room for competitors' proposed rule changes.
B. Costs
As previously noted, the Commission estimates that the annual
paperwork reporting costs will be 167 hours under the proposed rule.
The Commission believes that SROs may incur some costs associated with
training their personnel about the procedures for submitting proposed
rule changes electronically and submission of the information via EFFS.
However, the Commission believes that such costs will be one-time costs
and insubstantial since the SROs are already familiar with the
information required in filing a proposed rule change with the
Commission and will be required to submit the same information
electronically under these amendments. In the Electronic 19b-7
Proposing Release, the Commission estimated that the total amount of
one-time costs that SROs will incur in training personnel how to use
EFFS is 50 hours and received no comments on this estimate. The
Commission believes that the SROs may also incur some minimal costs
(currently $20 per year) associated with purchasing digital IDs for
each duly authorized officer electronic signatories.\68\ The Commission
also believes that the SROs will have to make temporary adjustments to
their recordkeeping procedures since the SROs will be required to print
out the Form 19b-7 signature block, manually sign proposed rule
changes, and retain the manual signature for not less than five years.
However, there are not expected to be additional costs associated with
such recordkeeping as SROs are currently required to retain the Form
19b-7 for not less than five years.
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\68\ In the Electronic 19b-7 Proposing Release, the Commission
estimated that each SRO will purchase five of their staff such
digital IDs. Thus, the annual cost of the digital ID for all SROs
will be $500 (5 SROs x $20 x 5). The Commission received no comments
on this estimate.
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Moreover, the Commission believes that the requirement that SROs
post proposed rule changes on their Web sites will impose some but not
substantial costs on most SROs. The Commission notes that no new costs
will be associated with posting a current and complete version of their
rules on their Web site because currently all SROs promptly post this
information on their Web sites pursuant to Rule 19b-4(m). In addition,
the Commission does not anticipate that SROs will incur any material
additional costs in complying with the change to Form 19b-4, which adds
the word ``officer'' to the Signature Box because the addition of the
word simply provides transparency to an obligation that already
exists.\69\ Therefore, at all times, each SRO must maintain a current
and complete set of its rules to facilitate compliance with this
requirement. Accordingly, the Commission does not believe that SROs
will incur substantial costs in simply posting this information on
their Web
[[Page 16189]]
sites because they are already required to do so.
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\69\ See Section F of the Instructions to Form 19b-4.
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V. Consideration of the Burden on Competition, Promotion of Efficiency,
and Capital Formation
Section 3(f) of the Act \70\ requires the Commission, whenever it
engages in rulemaking and is required to consider or determine whether
an action is necessary or appropriate in the public interest, to
consider whether the action will promote efficiency, competition, and
capital formation. In addition, Section 23(a)(2) of the Act \71\
requires the Commission, when promulgating rules under the Act, to
consider the impact any such rules would have on competition. Section
23(a)(2) further provides that the Commission may not adopt a rule that
would impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
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\70\ 15 U.S.C. 78c(f).
\71\ 15 U.S.C. 78w(a)(2).
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In the Electronic 19b-7 Proposing Release, the Commission
considered how the proposed amendments to Rule 19b-7 and Form 19b-7
would impact competition among SROs, and whether they would promote
efficiency and capital formation.\72\ The Commission requested comment
on the competitive or anticompetitive effects of the amendments to Rule
19b-7 and Form 19b-7 on any market participants if adopted as proposed.
The Commission also requested comment on what impact the amendments, if
adopted, would have on efficiency and capital formation. The Commission
requested commenters to provide empirical data to support their views.
The NFA and Dr. Angel both commented that they believed that the
proposal would increase the efficiency of the 19b-7 rule filing
process.\73\
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\72\ See supra note 1, 72 FR 9412, 9419.
\73\ See Angel Letter and NFA Letter, supra note 10.
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The amendments are intended to modernize the receipt and review of
SRO proposed rule changes and to make the SRO rule filing process more
efficient by conserving both SRO and Commission resources. As a result
of the new requirement to file proposed rule changes electronically,
the Commission anticipates that SROs will save time and resources
currently devoted to corresponding under a paper-based system. As
discussed in further detail in Section IV (``Costs and Benefits of the
Rulemaking''), the Commission anticipates that SROs will save staff
time in the preparation and transmission of Form 19b-7 as well as
associated preparation and delivery costs.
The amendments also are intended to improve the transparency of the
SRO rule filing process and facilitate access to current and complete
sets of SRO rules. The Commission believes that the Web site posting of
rule filings submitted on Form 19b-7 will promote competition among
SROs because they will be able to determine the proposed rules of their
competitors more easily. Further, because the proposal does not impact
a significant number of businesses or investors, the Commission
believes it will have minimal impact on capital formation.
VI. Regulatory Flexibility Act Certifications
The Commission has certified, pursuant to Section 605(b) of the
Regulatory Flexibility Act,\74\ that the amendments to Rule 19b-7 and
Form 19b-7 and Rule 19b-4 and Form 19b-4 will not have a significant
economic impact on a substantial number of small entities. This
certification, including the reasons supporting the certification, was
incorporated into the Electronic 19b-7 Proposing Release.\75\ The
Commission solicited comments as to the nature of any impact on small
entities. No comments were received.
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\74\ 5 U.S.C. 605(b).
\75\ See supra note 2, 72 FR 9412, 9419-20.
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VII. Statutory Basis and Text of Proposed Amendments
The amendments to Rule 19b-7 and Form 19b-7 under the Act are being
adopted pursuant to 15 U.S.C. 78a et seq., particularly sections 3(b),
6, 15A, 19(b), and 23(a) of the Act.
List of Subjects in 17 CFR Parts 240 and 249
Reporting and recordkeeping requirements, Securities.
0
In accordance with the foregoing, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
0
1. The authority citation for part 240 continues to read in part as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise
noted.
* * * * *
0
2. Section 240.19b-4 is amended by revising paragraph (m) to read as
follows:
Sec. 240.19b-4 Filings with respect to proposed rule changes by self-
regulatory organizations.
* * * * *
(m) (1) Each self-regulatory organization shall post and maintain a
current and complete version of its rules on its Web site.
(2) A self-regulatory organization, other than a self-regulatory
organization that is registered with the Commission under section 6(g)
of the Act (15 U.S.C. 78f(g)) or pursuant to section 15A(k) of the Act
(15 U.S.C. 78o-1(k)), shall update its Web site to reflect rule changes
filed pursuant to section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2))
within two business days after it has been notified of the Commission's
approval of a proposed rule change, and to reflect rule changes filed
pursuant to section 19(b)(3)(A) of the Act (15 U.S.C. 78s(b)(3)(A))
within two business days of the Commission's notice of such proposed
rule change.
(3) A self-regulatory organization that is registered with the
Commission under section 6(g) of the Act (15 U.S.C. 78f(g)) or pursuant
to section 15A(k) of the Act (15 U.S.C. 78o-1(k)), shall update its Web
site to reflect rule changes filed pursuant to section 19(b)(2) of the
Act by two business days after the later of:
(A) Notification that the Commission has approved a proposed rule
change; and
(B) (i) The filing of a written certification with the Commodity
Futures Trading Commission under section 5c(c) of the Commodity
Exchange Act (7 U.S.C. 7a-2(c));
(ii) Receipt of notice from the Commodity Futures Trading
Commission that it has determined that review of the proposed rule
change is not necessary; or
(iii) Receipt of notice from the Commodity Futures Trading
Commission that it has approved the proposed rule change.
(4) If a rule change is not effective for a certain period, the
self-regulatory organization shall clearly indicate the effective date
in the relevant rule text.
* * * * *
0
3. Section 240.19b-7 is amended by:
0
a. Adding a preliminary note;
0
b. Revising paragraphs (a) and (b)(1); and
0
c. Adding paragraphs (d), (e), (f) and (g).
The additions and revisions read as follows:
[[Page 16190]]
Sec. 240.19b-7 Filings with respect to proposed rule changes
submitted pursuant to Section 19(b)(7) of the Act.
Preliminary Note: A self-regulatory organization also must refer
to Form 19b-7 (17 CFR 249.822) for further requirements with respect
to the filing of proposed rule changes.
(a) Filings with respect to proposed rule changes by a self-
regulatory organization submitted pursuant to section 19(b)(7) of the
Act (15 U.S.C. 78s(b)(7)) shall be made electronically on Form 19b-7
(17 CFR 249.822).
(b) * * *
(1) A completed Form 19b-7 (17 CFR 249.822) is submitted
electronically; and
* * * * *
(d) Filings with respect to proposed rule changes by a self-
regulatory organization submitted on Form 19b-7 (17 CFR 249.822)
electronically shall contain an electronic signature. For the purposes
of this section, the term electronic signature means an electronic
entry in the form of a magnetic impulse or other form of computer data
compilation of any letter or series of letters or characters comprising
a name, executed, adopted or authorized as a signature. The signatory
to an electronically submitted rule filing shall manually sign a
signature page or other document, in the manner prescribed by Form 19b-
7, authenticating, acknowledging or otherwise adopting his or her
signature that appears in typed form within the electronic filing. Such
document shall be executed before or at the time the rule filing is
electronically submitted and shall be retained by the filer in
accordance with 17 CFR 240.17a-1.
(e) If the conditions of this section and Form 19b-7 (17 CFR
249.822) are otherwise satisfied, all filings submitted electronically
on or before 5:30 p.m. Eastern Standard Time or Eastern Daylight Saving
Time, whichever is currently in effect, on a business day, shall be
deemed filed on that business day, and all filings submitted after 5:30
p.m. Eastern Standard Time or Eastern Daylight Saving Time, whichever
is currently in effect, shall be deemed filed on the next business day.
(f) The self-regulatory organization shall post the proposed rule
change, and any amendments thereto, submitted on Form 19b-7 (17 CFR
249.822), on its Web site within two business days after the filing of
the proposed rule change, and any amendments thereto, with the
Commission. Unless the self-regulatory organization withdraws the
proposed rule change or is notified that the proposed rule change is
not properly filed, such proposed rule change and amendments shall be
maintained on the self-regulatory organization's Web site until 60 days
after:
(1) The filing of a written certification with the Commodity
Futures Trading Commission under section 5c(c) of the Commodity
Exchange Act (7 U.S.C. 7a-2(c));
(2) The Commodity Futures Trading Commission determines that review
of the proposed rule change is not necessary; or
(3) The Commodity Futures Trading Commission approves the proposed
rule change; and
(4) In the case of a proposed rule change, or any amendment
thereto, that has been withdrawn or not properly filed, the self-
regulatory organization shall remove the proposed rule change, or any
amendment, from its Web site within two business days of notification
of improper filing or withdrawal by the self-regulatory organization of
the proposed rule change.
(g)(1) Each self-regulatory organization shall post and maintain a
current and complete version of its rules on its Web site.
(2) The self-regulatory organization shall update its Web site to
reflect rule changes filed pursuant to section 19(b)(7) of the Act (15
U.S.C. 78s(b)(7)), by two business days after the later of:
(A) The Commission's notice of such proposed rule change; and
(B)(i) The filing of a written certification with the Commodity
Futures Trading Commission under section 5c(c) of the Commodity
Exchange Act (7 U.S.C. 7a-2(c));
(ii) Receipt of notice from the Commodity Futures Trading
Commission that it has determined that review of the proposed rule
change is not necessary; or
(iii) Receipt of notice from the Commodity Futures Trading
Commission that it has approved the proposed rule change.
(3) If a rule change is not effective for a certain period, the
self-regulatory organization shall clearly indicate the effective date
in the relevant rule text.
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
0
4. The authority citation for part 249 continues to read in part as
follows:
Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C.
1350, unless otherwise noted.
0
5. Section 249.822 is revised to read as follows:
Sec. 249.822 Form 19b-7, for electronic filing with respect to
proposed rule changes by self-regulatory organizations under Section
19(b)(7)(A) of the Securities Exchange Act of 1934.
This form shall be used by self-regulatory organizations, as
defined in section 3(a)(25) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(25)), to file electronically proposed rule changes with
the Commission pursuant to section 19(b)(7) of the Act (15 U.S.C.
78s(b)(7)) and Sec. 240.19b-7 of this chapter.
0
6. Form 19b-7 (referenced in Sec. 249.822) is revised to read as
follows:
Note: Form 19b-7 is attached as Appendix A to this document.
Note: The text of Form 19b-7 will not appear in the Code of
Federal Regulations.
By the Commission.
Dated: March 19, 2008.
Florence E. Harmon,
Deputy Secretary.
Appendix A
General Instructions for Form 19b-7
A. Use of the Form
All self-regulatory organization proposed rule changes submitted
pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''), shall be filed electronically through the Electronic Form
Filing System (``EFFS''), a secure Web site operated by the
Commission. This form shall be used for filings of proposed rule
changes by all self-regulatory organizations pursuant to Section
19(b)(7) of the Act. National securities exchanges registered
pursuant to Section 6(g) of the Act and limited purpose national
securities associations registered pursuant to Section 15A(k) of the
Act are self-regulatory organizations for purposes of this form.
B. Need for Careful Preparation of the Completed Form, Including
Exhibits
This form, including the exhibits, is intended to elicit
information necessary for the public to provide meaningful comment
on the proposed rule change and for the Commission to determine
whether abrogation of the proposal is appropriate because it unduly
burdens competition or efficiency, conflicts with the securities
laws, or is inconsistent with the public interest and the protection
of investors. The self-regulatory organization must provide all the
information called for by the form, including the exhibits, and must
present the information in a clear and comprehensible manner.
The proposed rule change shall be considered filed with the
Commission on the date on which the Commission receives the proposed
rule change if the filing complies with all requirements of this
form. Any filing that does not comply with the requirements of this
form may be returned to the self-regulatory organization at any time
before the issuance of the notice of filing. Any filing so returned
shall for all purposes be deemed not to have been filed with the
Commission. See
[[Page 16191]]
also Rule 0-3 under the Act (17 CFR 240.0-3).
C. Documents Comprising the Completed Form
The completed form filed with the Commission shall consist of
the Form 19b-7 Page 1, numbers and captions for all items, responses
to all items, and exhibits required in Instruction H. In responding
to an item, the completed form may omit the text of the item as
contained herein if the response is prepared to indicate to the
reader the coverage of the item without the reader having to refer
to the text of the item or its instructions. Each filing shall be
marked on the Form 19b-7 with the initials of the self-regulatory
organization, the four-digit year, and the number of the filing for
the year (i.e., SRO-YYYY-XX). If the self-regulatory organization is
filing Exhibit 2 or 3 via paper, the exhibits must be filed within 5
business days of the electronic submission of all other required
documents.
D. Amendments
If information on this form or exhibit thereto is or becomes
inaccurate before the proposed rule change becomes effective, the
self-regulatory organization shall file amendments correcting any
such inaccuracy. Amendments shall be filed as specified in
Instruction E.
Amendments to a filing shall include the Form 19b-7 Page 1
marked to number consecutively the amendments, numbers and captions
for each amended item, amended response to the item, and required
exhibits. The amended description in Section II. A. 1. of Exhibit 1
shall explain the purpose of the amendment and, if the amendment
changes the purpose of or basis for the proposed rule change, the
amended response shall also provide a revised purpose and basis
statement for the proposed rule change. Exhibit 1 shall be re-filed
if there is a material change from the immediately preceding filing
in the language of the proposed rule change or in the information
provided.
If the amendment alters the text of an existing rule, the
amendment shall include the text of the existing rule, marked in the
manner described in Section I. of Exhibit 1 using brackets to
indicate words to be deleted from the existing rule and underscoring
to indicate words to be added. The purpose of this marking
requirement is to maintain a current copy of how the text of the
existing rule is being changed.
If the self-regulatory organization is amending only part of the
text of a lengthy proposed rule change, it may, with the Commission
staff's permission, file only those portions of the text of the
proposed rule change in which changes are being made if the filing
(i.e., partial amendment) is clearly understandable on its face.
Such partial amendment shall be clearly identified and marked to
show deletions and additions.
If, after the rule change is filed but before it becomes
effective, the self-regulatory organization receives or prepares any
correspondence or other communications reduced to writing (including
comment letters) to and from such self-regulatory organization
concerning the proposed rule change, the communications shall be
filed as Exhibit 2. If information in the communication makes the
rule change filing inaccurate, the filing shall be amended to
correct the inaccuracy. If such communications cannot be filed
electronically in accordance with Instruction E, the communications
shall be filed in accordance with Instruction F.
E. Signature and Filing of the Completed Form
All proposed rule changes, amendments, extensions, and
withdrawals of proposed rule changes shall be filed through the
EFFS. In order to file Form 19b-7 through EFFS, self-regulatory
organizations must request access to the SEC's External Application
Server by completing a request for an external account user ID and
password for the use of the External Application User Authentication
Form.
Initial requests will be received by contacting the Division of
Trading and Markets Administrator located on our Web site (http://
www.sec.gov). An e-mail will be sent to the requestor that will
provide a link to a secure Web site where basic profile information
will be requested.
A duly authorized officer of the self-regulatory organization
shall electronically sign the completed Form 19b-7 as indicated on
Page 1 of the Form. In addition, a duly authorized officer of the
self-regulatory organization shall manually sign one copy of the
completed Form 19b-7, and the manually signed signature page shall
be maintained pursuant to Section 17 of the Act.
F. Procedures for Submission of Paper Documents for Exhibits 2 and
3
To the extent that Exhibit 2 or 3 cannot be filed electronically
in accordance with Instruction E, four copies of Exhibit 2 or 3
shall be filed with the Division of Trading and Markets, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-
6628. Page 1 of the electronic Form 19b-7 shall accompany paper
submissions of Exhibit 2 or 3. If the self-regulatory organization
is filing Exhibit 2 or 3 via paper, they must be filed within five
days of the electronic filing of all other required documents.
G. Withdrawals of Proposed Rule Changes
If a self-regulatory organization determines to withdraw a
proposed rule change, it must complete Page 1 of the Form 19b-7 and
indicate by selecting the appropriate check box to withdraw the
filing.
H. Exhibits
List of exhibits to be filed, as specified in Instructions C and
D:
Exhibit 1. Completed Notice of Proposed Rule Change for
publication in the Federal Register. It is the responsibility of the
self-regulatory organization to prepare Items I, II and III of the
notice. Leave a 1-inch margin at the top, bottom, and right hand
side, and a 1\1/2\ inch margin at the left hand side. Number all
pages consecutively. Double space all primary text and single space
lists of items, quoted material when set apart from primary text,
footnotes, and notes to tables. Amendments to Exhibit 1 should be
filed in accordance with Instructions D and E.
Exhibit 2. (a) Copies of notices issued by the self-regulatory
organization soliciting comment on the proposed rule change and
copies of all written comments on the proposed rule change received
by the self-regulatory organization (whether or not comments were
solicited), presented in alphabetical order, together with an
alphabetical listing of such comments. If such notices and comments
cannot be filed electronically in accordance with Instruction E, the
notices and comments shall be filed in accordance with Instruction
F.
(b) Copies of any transcript of comments on the proposed rule
change made at any public meeting or, if a transcript is not
available, a copy of the summary of comments on the proposed rule
change made at such meeting. If such transcript of comments or
summary of comments cannot be filed electronically in accordance
with Instruction E, the transcript of comments or summary of
comments shall be filed in accordance with Instruction F.
(c) Any correspondence or other communications reduced to
writing (including comment letters and e-mails) concerning the
proposed rule change prepared or received by the self-regulatory
organization. All correspondence or other communications should be
presented in alphabetical order together with an alphabetical
listing of the authors, and shall be filed in accordance with
Instruction E. If such communications cannot be filed electronically
in accordance with Instruction E, the communications shall be filed
in accordance with Instruction F.
(d) If after the proposed rule change is filed but before it
becomes effective, the self-regulatory organization prepares or
receives any correspondence or other communications reduced to
writing (including comment letters and e-mails) to and from such
self-regulatory organization concerning the proposed rule change,
the communications shall be filed in accordance with Instruction E.
All correspondence or other communications should be presented in
alphabetical order together with an alphabetical listing of the
authors. If such communications cannot be filed electronically in
accordance with Instruction E, the communications shall be filed in
accordance with Instruction F.
Exhibit 3. If any form, report, or questionnaire is--
(a) Proposed to be used in connection with the implementation or
operation of the proposed rule change, or
(b) Prescribed or referred to in the proposed rule change,
then the form, report, or questionnaire must be attached and shall
be considered as part of the proposed rule change. If completion of
the form, report or questionnaire is voluntary or is required
pursuant to an existing rule of the self-regulatory organization,
then the form, report, or questionnaire, together with a statement
identifying any existing rule that requires completion of the form,
report, or questionnaire, shall be attached as Exhibit 3. If the
form, report, or questionnaire cannot be filed electronically in
accordance with
[[Page 16192]]
Instruction E, the documents shall be filed in accordance with
Instruction F.
Exhibit 4. The self-regulatory organization must attach as
Exhibit 4 proposed changes to its rule text. Changes in, additions
to, or deletions from, any existing rule shall be set forth with
brackets used to indicate words to be deleted and underscoring used
to indicate words to be added. Exhibit 4 shall be considered part of
the proposed rule change.
Exhibit 5. The self-regulatory organization must attach one of
the following:
Certificate of Effectiveness of Proposed Rule Change: Attach a
copy of the certification submitted to the CFTC pursuant to Section
5c(c) of the Commodity Exchange Act.
CFTC Request or Determination that Review of the Proposed Rule
Change is Not Necessary: Attach a copy of any request submitted to
the CFTC for determination that review of the proposed rule change
is not necessary and any indication from the CFTC that it has
determined that review of the proposed rule change is not necessary.
Request for CFTC Approval of Proposed Rule Change: Attach a copy
of any request submitted to the CFTC for approval of the proposed
rule change and any indication received from the CFTC that the
proposed rule change has been approved.
BILLING CODE 8011-01-P
[[Page 16193]]
[GRAPHIC] [TIFF OMITTED] TR27MR08.015
[[Page 16194]]
[GRAPHIC] [TIFF OMITTED] TR27MR08.016
BILLING CODE 8011-01-C
[[Page 16195]]
Information To Be Included in the Completed Exhibit 1
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34- ; File No. SR-[SRO Name]-[YYYY]-[XX])
SELF-REGULATORY ORGANIZATIONS; [SRO Name]; Proposed Rule Change
Relating to [brief description of the subject matter of the proposed
rule change].
Pursuant to Section 19(b)(7) of the Securities Exchange Act of
1934 (``Act''),\76\ notice is hereby given that on [date \77\], the
[name of self-regulatory organization] filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change described in Items I, II, and III below, which Items have
been prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule
change from interested persons. [Name of self-regulatory
organization] also has filed this proposed rule change concurrently
with the Commodity Futures Trading Commission (``CFTC''). [Section
19(b)(7)(B) provides that a proposed rule change may take effect
upon the occurrence of one of three events. The self-regulatory
organization should include one of the following sentences,
whichever is applicable:]
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\76\ 15 U.S.C. 78s(b)(7).
\77\ To be completed by the Commission. This date will be the
date on which the Commission receives the proposed rule change
filing if the filing complies with all requirements of this form.
See General Instructions for Form 19b-7.
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The [name of self-regulatory organization] filed a written
certification with the CFTC under Section 5c(c) of the Commodity
Exchange Act on [date]; or
The [name of self-regulatory organization] on [date], has
requested that the CFTC make a determination that review of the
proposed rule change of the [self-regulatory organization] is not
necessary. The CFTC has [made such determination on [date]]; or [has
not made such determination]; or
The [name of self-regulatory organization] on [date] submitted
the proposed rule change to the CFTC for approval. The CFTC
[approved the proposed rule change on [date]]; or [has not approved
the proposed rule change].
I. Self-Regulatory Organization's Description and Text of the Proposed
Rule Change
[Supply a brief statement of the terms of substance of the
proposed rule change. If the proposed rule change is relatively
brief, a separate statement need not be prepared, and the text of
the proposed rule change may be inserted in lieu of the statement of
the terms of substance. If the proposed rule change amends an
existing rule, indicate the changes in the rule by brackets for
words to be deleted and underscoring for words to be added.]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for the Proposed Rule Change
In its filing with the Commission, the self-regulatory
organization included statements concerning the purpose of and basis
for the proposed rule change and discussed any comments it received
on the proposed rule change. The text of these statements may be
examined at the places specified in Item IV below. The self-
regulatory organization has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for the Proposed Rule Change
1. Purpose
[Provide a statement of the purpose of the proposed rule change.
The statement must describe the text of the proposed rule change in
a sufficiently detailed and specific manner as to enable the public
to provide meaningful comment on the proposal. At a minimum, the
statement should:]
(a) [Describe the reasons for adopting the proposed rule change,
any problems the proposed rule change is intended to address, the
manner in which the proposed rule change will resolve those
problems, the manner in which the proposed rule change will affect
various persons (e.g. brokers, dealers, issuers, and investors), and
any significant problems known to the self-regulatory organization
that persons affected are likely to have in complying with the
proposed rule change; and]
(b) [Describe how the proposed rule change relates to existing
rules of the self-regulatory organization. If the self-regulatory
organization reasonably expects that the proposed rule change will
have any direct effect, or significant indirect effect, on the
application of any other rule of the self-regulatory organization,
set forth the designation or title of any such rule and describe the
anticipated effect of the proposed rule change on the application of
such other rule. Include the file numbers for prior filings with
respect to any existing rule specified.]
2. Statutory Basis
[Explain why the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the self-regulatory organization. A mere assertion
that the proposed rule change is consistent with those requirements
is not sufficient. Certain limitations that the Act imposes on self-
regulatory organizations are summarized in the notes that follow.
Note 1. National Securities Exchanges. Under Section 6 of the
Act, rules of a national securities exchange may not permit unfair
discrimination between customers, issuers, brokers, or dealers, and
may not regulate, by virtue of any authority conferred by the Act,
matters not related to the purposes of the Act or the administration
of the self-regulatory organization.
Note 2. Limited Purpose National Securities Associations. Under
Section 15A(k) of the Act, rules of a national securities
association registered for the limited purpose of regulating the
activities of members who are registered as brokers or dealers in
security futures products must be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general to protect investors and the
public interest, including rules governing sales practices and the
advertising of security futures products reasonably comparable to
those of other national securities associations registered pursuant
to Section 15A(a) that are applicable to security futures products.
The rules may not be designed to regulate, by virtue of any
authority conferred by the Act, matters not related to the purposes
of the Act or the administration of the association.]
B. Self-Regulatory Organization's Statement on Burden on
Competition
[The information required by this section must be sufficiently
detailed and specific to support the premise that the proposed rule
change does not unduly burden competition. In responding to this
section, the self-regulatory organization must:
State whether the proposed rule change will have an
impact on competition and, if so
(i) State whether the proposed rule change will impose any
burden on competition or whether it will relieve any burden on, or
otherwise promote, competition, and
(ii) Specify the particular categories of persons and kinds of
businesses on which any burden will be imposed and the ways in which
the proposed rule change will affect them.
Explain why any burden on competition is not undue; or,
if the self-regulatory organization does not believe that the burden
on competition is significant, explain why.
In providing those explanations, set forth and respond in detail to
written comments as to any significant impact or burden on
competition perceived by any person who has made comments on the
proposed rule change to the self-regulatory organization.]
C. Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
[If written comments were received (whether or not comments were
solicited) from members of or participants in the self-regulatory
organization or others, summarize the substance of all such comments
received and respond in detail to any significant issues that those
comments raised about the proposed rule change.
If an issue is summarized and responded to in detail under
Section II.A.1. or Section II.B. of this Form 19b-7 Notice, that
response need not be duplicated if appropriate cross-reference is
made to the place where the response can be found. If comments were
not or are not to be solicited, so state.]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
[The self-regulatory organization shall include the following
with the applicable phrase on the proposed rule change's
effectiveness:]
The proposed rule change has become effective on [insert date of
filing of written certification with the CFTC under Section 5c(c) of
the Commodity Exchange Act; or the date of determination by the CFTC
that
[[Page 16196]]
review of the proposed rule change is not necessary; or the date of
approval of the proposed rule change by the CFTC]. [or]
The proposed rule change is not effective because the CFTC [has
not determined that review of the proposed rule changes is not
necessary or has not approved the proposed rule change].
At any time within 60 days of the date of effectiveness of the
proposed rule change, the Commission, after consultation with the
CFTC, may summarily abrogate the proposed rule change and require
that the proposed rule change be refiled in accordance with the
provisions of Section 19(b)(1) of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views,
and arguments concerning the foregoing, including whether the
proposed rule change is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-[SRO]-[YYYY]-[XX] on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-[SRO]-[YYYY]-[XX].
This file number should be included on the subject line if e-mail is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post
all comments on the Commission's Internet Web site (http://
www.sec.gov/rules/sro.shtml). Copies of the submission, all
subsequent amendments, all written statements with respect to the
proposed rule change that are filed with the Commission, and all
written communications relating to the proposed rule change between
the Commission and any person, other than those that may be withheld
from the public in accordance with the provisions of 5 U.S.C. 552,
will be available for inspection and copying in the Commission's
Public Reference Room, 100 F Street, NE., Washington, DC 20549, on
official business days between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be available for inspection and
copying at the principal office of the [SRO]. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make publicly available. All
submissions should refer to File Number SR-[SRO]-[YYYY]-[XX] and
should be submitted on or before April 17, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\1\
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\1\ 17 CFR 200.30-3(a)(73).
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Secretary
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Appendix B
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[GRAPHIC] [TIFF OMITTED] TR27MR08.018
[FR Doc. E8-5998 Filed 3-26-08; 8:45 am]
BILLING CODE 8011-01-C